Answer:
Hudson Co.
HUDSON CO.
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2020
Sales (10,100 units at $300 each) $ 3,030,000
Variable costs (10,100 units at $232 each) 2,343,200
Contribution margin 686,800
Fixed costs 511,000
Pretax income $ 175,800
Explanation:
a) Data and Calculations:
HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2019
Sales (10,100 units at $300 each) $ 3,030,000
Variable costs (10,100 units at $240 each) 2,424,000
Contribution margin 606,000
Fixed costs 468,000
Pretax income $ 138,000
HUDSON CO.
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2020
Sales (10,100 units at $300 each) $ 3,030,000
Variable costs (10,100 units at $232 each) 2,343,200 ($240 - $8)
Contribution margin 686,800
Fixed costs 511,000 ($468,000+$43,000)
Pretax income $ 175,800
b) Hudson's pretax income will increase by $37,800 ($175,800 - $138,000), assuming it invests in the "new machine that will increase its fixed costs by $43,000 per year and decrease its variable costs by $8 per unit."
